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When is it smart for a city to go smart? (Hint: The answer is arithmetic)

Wed, 2013-10-30 06:00 -- Brian Cotton

Frost & Sullivan is a leading research and consulting firm and Brian Cotton leads their Information and Communications Technology Consulting (ICT) practice. Since ICT is the core of a smart city, I'm pleased that we can share this guest post from him. Especially since he tackles the tough issue of how to calculate the costs for a realistic cost/benefit analysis.

So many people chronicle the benefits of smart cities in vague generalities. And ignore the cost question entirely. But as Brian points out, the smart thing to do is to calculate the numbers on both sides of the equation. That's the basis for a truly realistic discussion of whether, when and where to launch your smart city journey. -- Jesse Berst, Smart Cities Council Chairman

By Brian Cotton

The smart city is generating a lot of enthusiasm, with many believing that it has the potential to become a panacea for urban problems. The reality is that a smart city will be good for meeting specific needs of a city and its citizens, such as better transportation or more efficient social services. This can be a good thing, but as many of us are likely to be citizens of a smart city in the future, we need to think carefully before we invest in going smart.

Such careful consideration requires a common frame of reference to enable the stakeholders in a smart city to discuss, decide and then plan to become smart. The focus needs to be on understanding both the benefits and the costs involved. In my work as an analyst, I use a conceptual cost-value analysis as a way to understand cost-benefit issues.

Think in terms of data

Think of the smart city in terms of data analysis. Data feeds collected from all over the city are brought together into a central computing engine, processed and analyzed, and the outputs are distributed to users around the city.

Bringing all these data feeds in, processing them, and then disseminating the results carries certain direct costs: installation, integration, operation and maintenance. There are also potential indirect costs including difficult issues such as data privacy, opportunity costs of doing one thing and not another, etc. The value lies in the decisions and actions citizens and government take based on the insight gleaned from the analyses.

For example, to build “smart” into a city’s mass transit system, data feeds from across the city’s transit systems channel into a central command center, where they are processed to produce a set of key performance indicators. Those KPIs are distributed to transit authority officials, government and citizens, who then make decisions about when to perform maintenance, when to invest in new infrastructure, where to best route traffic during a large event, or even when to expect the next bus to arrive.

The tough (but worthwhile) job of assigning costs

Assigning a cost to each data feed is difficult, but thinking in terms of a fixed connectivity cost is a good place to start. Some sensors may only cost a few dollars a month to connect, whereas subway trains may be thousands of dollars to connect. Data center and computing costs are easier, as would be a cloud implementation. Indirect costs and the values ascribed to the benefits are subjective, yet approximate figures can be assigned. At the risk of oversimplifying the calculus, becoming smart is smart only if the value of the benefits is equal to or greater than the costs.

The important point of this cost-value heuristic is that it frames a discussion of using a smart city as a way to meet the needs of a city in terms that are familiar to politicians, engineers and citizens. A smart city has to meet the needs of its stakeholders in order to be valuable, and it has to do it more efficiently than alternatives. Using this as a framework to guide the discussion between citizens, governments and technology companies, we can make a better decision on when it is smart to go smart.

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Brian Cotton is Vice President, Information and Communications Technologies, at Frost & Sullivan. He has more than 20 years of research and market strategy experience, including 16 years in Information and Communications Technology (ICT).